Lumentum Shows Why Laser Makers Could Be AI's Underrated Winners

Laser makers might look like niche suppliers in the AI infrastructure boom, but Serenity argues they're positioned to become much bigger players.

In a September 7 post, Serenity said its earlier revenue estimates — built around Sivers' (SIVE) target of producing 100 million CW DFB lasers a year — were only illustrative. The bigger reason for its bullish view, it explained, is that laser companies aren't limited to a single product: they can expand into other parts of the optical networking chain inside data centers.

Serenity points to Lumentum (LITE). After Lumentum acquired Cloud Light, which makes pluggable optical modules, its potential serviceable market in data centers grew more than fivefold. Lumentum's OFC presentation materials also show that an ELS business based on UHP laser chips could add roughly a 2x expansion of its total addressable market.

Meanwhile, just one UHP laser wafer fab's laser operation is expected to bring in about $5 billion of annual revenue after production ramps. Combined with the 55%-65% gross margins AAOI cited for CPO lasers, lasers are already a highly profitable line of business. Serenity believes the market could still face a supply-demand gap even as the industry keeps adding capacity.

With several tech cycles overlapping — NPO, CPO, and 1.6T pluggable optical modules — laser makers should be able to keep entering new product markets. That's why Serenity thinks they deserve a higher valuation premium than companies that stay put in a single layer of the supply chain.

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